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What is a balloon mortgage?

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It is a mortgage in which the entire unpaid principal becomes due and payable on a given date, five, ten, or any number of years in the future. The borrower must pay up, refinance, or lose the property.

Interest rates on balloon mortgages are lower than for fixed-rate mortgages. So their monthly mortgage payments will be lower than the monthly payments for conventional mortgages.

Balloon mortgages are a good way to keep monthly housing costs to a minimum if you plan to move or sale well within the period of the balloon.

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